Where plaintiffs filed tort claims related to a car accident, and those tort claims were not compulsory counterclaims in a previous action filed by defendant against plaintiffs based on the same accident, the ruling that plaintiffs’ claims were barred by the doctrine of res judicata was reversed.
In Albers v. Powers, No. M2021-00577-COA-R3-CV (Tenn. Ct. App. July 12, 2022), plaintiff wife and defendant were in a car accident. Defendant had previously filed a personal injury suit against plaintiff wife seeking damages related to the car accident. That suit was settled, and the trial court entered an Agreed Order of Dismissal which stated that “all claims asserted in this suit by Richard Powers against defendants, Lori Albers…are dismissed WITH PREJUDICE.”
Two weeks after this order was entered, plaintiffs filed the present action, asserting claims of negligence and loss of consortium. Defendant filed a motion to dismiss, arguing that the suit was barred by the doctrine of res judicata. The trial court agreed, dismissing plaintiffs’ claims, but the Court of Appeals reversed dismissal.
“The doctrine of res judicata, also referred to as claim preclusion, bars a second suit between the same parties or their privies on the same cause of action with respect to all issues which were or could have been litigated in the former suit.” (internal citation omitted). In this opinion, the Court of Appeals had to “consider whether res judicata applies to a ‘less straightforward’ set of circumstances involving a defendant’s counterclaims,” as the claims advanced by plaintiffs here were “claims that sounded in tort that could have been asserted as counterclaims in the first suit.” (internal citation omitted).
Looking to previous Tennessee caselaw, the Court noted that “res judicata does not necessarily have the same broad preclusive effect with regard to counterclaims that could have been asserted in an earlier proceeding.” (internal citation omitted). Based on previous caselaw and the Restatement (Second) of Judgments, the Court identified a two-step process for evaluating whether a claim that could have been asserted as a counterclaim in an earlier suit is barred by res judicata in Tennessee.
First, the Court considered whether the counterclaim was compulsory. Counterclaims are governed by Tennessee Rule of Civil Procedure 13.01, which explicitly excludes tort claims from compulsory counterclaim status. Because plaintiffs’ claims here sounded in tort, they were not compulsory counterclaims in the previous suit.
Second, the Court looked at “whether [plaintiffs’] tort claims, should they prevail on them, would nullify the initial judgment or would impair rights established in the initial action.” On this point, the Court found that the present suit “would not prevent [defendant] from being paid in full in accordance with the terms of the settlement agreement the parties voluntarily executed” and that plaintiffs’ claims had “no impact on the prior agreed judgment.”
Because the potential counterclaims were not compulsory in the earlier suit and the tort claims would not impact the previous judgment, dismissal based on res judicata was reversed. This case contains a thorough analysis of res judicata and previous potential counterclaims, and anyone litigating such an issue should read this opinion.
This opinion was released two months after oral arguments in this case.